2024 EVENTS AND BACKGROUND

Event

In 2024, BYD fired the first shot in a price war by launching two plug-in hybrid models—the Qin PLUS Glory Edition and the Destroyer 05 Glory Edition—with starting prices of 79,800 yuan, a 20,000-yuan reduction from their previous Champion Edition versions while offering additional features. On February 23, the BYD Dolphin Glory Edition was also officially released, starting at 99,800 yuan.

Background

Corporate Goals

After fully transitioning into a NEV manufacturer, BYD emerged as a key player in China’s NEV market. In 2023, it set the ambitious target of “becoming China’s top automaker,” achieving annual sales of 3.02 million units (+61.9% YoY). To maintain high sales growth and expand market share in 2024, BYD targeted the A-seg. (compact car) market, given that vehicles priced between 100,000–200,000 yuan represent the largest segment in China’s auto market—traditionally dominated by ICE vehicles – with ample room for NEV penetration.

Market Competition Pressures

A fierce price war had already begun in 2023, with automakers sacrificing margins for volume, though no clear winner emerged. In 2024, competition intensified as joint-venture automakers stepped up their NEV efforts. To outperform rivals, BYD adopted aggressive price cuts to enhance competitiveness.

Consumer Demand Characteristics

Buyers in the A-segment market are highly price-sensitive and prioritize cost-effectiveness. BYD’s strategy of cutting prices while upgrading features helped attract customers previously loyal to gasoline-powered cars, allowing it to capture market share from ICE competitors.

2025 EVENTS AND BACKGROUND

Event

On May 23, 2025, BYD initiated its third major price cut of the year, covering 22 smart-driving-enabled models across its Dynasty and Ocean series, with maximum discounts reaching 53,000 yuan, including The Seal 07 DM-i Smart Edition plunging from 155,800 to 102,800 yuan (-34%). The Seagull Smart Edition starting at 55,800 yuan, setting a new low for its segment. The Qin PLUS DM-i Smart Edition priced at 63,800 yuan, marking the first time high-end smart-driving features entered the sub-100,000 yuan market.

Background

Sales Target Pressure: BYD set a 2025 target of 5.5 million units, including 4.7 million domestic sales and 800,000 exports. However, Jan-Apr sales stood at just 1.38 million, achieving only 25% of the annual goal. Key models like the Qin series saw a steep decline, with monthly sales dropping from 75,000 units (H2 2024) to 44,600 units, forcing BYD to rely on discounts for sales recovery.

Intensified Market Competition

ICE players accelerating electrification – Models like the Toyota Corolla Hybrid and Nissan Sylphy E-Power slashed prices below 120,000 yuan, threatening BYD’s 100,000–150,000 yuan core market.

EV rivals replicating BYD’s playbook – Brands like Wuling Starlight and Changan Qiyuan launched 70,000-yuan BEVs, mirroring BYD’s earlier “people’s car” strategy, creating cross-segment pressure.

Cost and Profit Considerations:

BYD’s debt-to-asset ratio hit 74.64%, with R&D spending surging at a 70% CAGR—reaching 54.2 billion yuan in 2024. Meanwhile, rapid capacity expansion led to high depreciation costs (56.9 billion yuan in 2024). To offset these expenses, BYD needed higher sales volumes to stabilize cash flow. Falling lithium carbonate prices provided additional room for price reductions for sure.

Industry Policy Impact

In 2024, the auto industry’s average profit margin was just 4.3%, with NEV prices falling 9.2% YoY (vs. 6.8% for ICE vehicles). Regulators previously “guided” automakers to halt direct price cuts, prompting BYD to frame discounts as “intelligent driving democratization”- though the market reaction was lukewarm, forcing BYD to re-ignite the price war in 2025.

THE STRATEGIC LOGIC: WHY THIS ISN’T JUST A DISCOUNT

BYD’s latest price cuts are not just about short-term sales—they reflect a fundamental restructuring of the automotive industry’s economics.

Three key cost advantages:

1. Vertical integration – Control over batteries, motors, and even lithium mines (6 in Africa) buffers against supply chain risks.
2. Economies of scale – 18% YoY cost reduction per vehicle in 2024 (versus industry average of 9%).
3. Tech-driven efficiency – Standardized “God’s Eye” smart driving system reduces marginal costs for premium features.

Result? BYD’s gross margins (~10%) remain solid even after slashing prices by 25%, while legacy automakers struggle to keep up.

2. INDUSTRY SHAKEOUT: WHO LOSES?

• EV startups (NIO, XPeng, Li Auto) – Must accelerate tech development or risk losing premium market share.
• Legacy automakers (VW, Toyota) – Without rapid localization (e.g., VW’s 80% local supply chain target in China), ICE sales will collapse.
• Second-tier Chinese brands (Geely, Great Wall) – Need a clear BEV/PHEV strategy or face irrelevance.

Data shows ICE car sales dropped 22% YoY in Q1 2025, while EV adoption surpassed 50%—and the gap is widening.

WHAT COMES NEXT?

Slashing ADAS-equipped models to the $7,000 range—aren’t mere promotions but a systemic overhaul of automotive economics. This battle transcends pricing. BYD’s “Vision of God” ADAS deployment in budget models recalibrates value benchmarks: with EV fundamentals (such as 20ms torque response vs ICE’s 300ms response) commoditized, smart features become the new battleground.

FINAL TAKE

This isn’t just a price war- it’s a transformation of how cars are made, sold, and priced worldwide. As Wang Chuanfu asserted emotionally at the shareholder meeting: “We focus solely on technological cost reduction” – a mantra echoing all industrial disruptors’ growing pains.

BYD’s aggressive pricing has drawn criticism. I call it “winning in business but losing in ethics.” Rumors suggest regulators already summoned the company for talks in Beijing. Regardless, the market shift is undeniable.